- Jun 12, 2001
Your theory is wrong. The Fed does not control mortgage rates.Originally posted by: Atreus21
My theory is that the Fed upping the interest rate over the past few years led to ARM holder's defaulting on their loans, which contributed greatly to the crisis.
On topic: Clinton signed 4 major pieces of housing/banking legislation during his administration. They were:
- Major amendments to the Community Reinvestment Act (CRA 1977, subject of the OP) which allowed for the securitization of subprime mortgages starting in 1995.
- The Homeownership and Equity Proctection Act (HOEPA) of 1995, which amended TILA Reg Z to broaden the definition of high-cost loans, effectively establishing a usury limit of rates and fees for mortgages (defined as an APR 10% above the Prime and/or total fees exceeding 8 points). The Bush admin later lowered those triggers to 8% and/or 5 points, respectively.
- The Homeowner's Protection Act of 1998 (aka PMI Act), which reduced the cost of mortgage insurance and established set cancellation points/dates.
- The Gramm-Leach-Bliley Act of 1999 (GLBA), which de-regulated the banking and financial services industries to an extent that had not been seen since before the Great Depression.